Fixed Costs Determination Explained
Posted on 2nd August 2024 at 10:29
By Sean Linley, Senior Costs Draftsman
The Fixed Costs Determination (FCD) process and accompanying Precedent U has now been revealed following publication of the Civil Procedure (Amendment No. 3) Rules 2024 and the 171st Practice Direction.
For those already subscribed to our unlimited Fixed Costs Retainer service, the new procedure will be included within the same.
What is Fixed Costs Determination and when does it apply from?
In short it's a new summary procedure which comes into force from 1 October 2024 which allows for any disputes arising from claims subject to fixed costs to be dealt with on paper. The process will be similar to Provisional Assessment in that the initial determination won't require a hearing but either party can request an oral appeal of any determination. It also sees the introduction of a formal costs document for the first time in fixed costs. Previously there was no precedent or template for parties to follow.
Does Fixed Costs Determination apply to all cases?
An important question is whether this only applies to the new fixed costs rules or will it capture all fixed costs disputes after 1 October 2024?
CPR 45.64(1) provides that FCD applies to all claims to which Part 45 applies. However, Part 45 in its current guise does not apply to claims to which the pre October 2023 fixed costs rules apply. Pragmatically, however, it is envisaged it'd be preferable for any fixed costs disputes arising on or after 1 October 2024 to go through the new streamlined process because it makes sense to do so. The current alternative is to make an application under Part 23 which then requires an oral hearing. It's hard to see the judiciary wanting pre-October 2023 cases to have an oral hearing whilst post-October 2023 cases are dealt with on paper. Our view (and it is just that) is that we would expect the court's preference to be to utilise FCD for all fixed costs disputes from 1 October 2024.
This issue aside, for clarity Part 45 in its current guise includes Personal Injury claims submitted via either the RTA or EL/PL Portals, Fast Track, Intermediate Track and Noise Induced Hearing Loss claims (on Fast or Intermediate Track).
If in doubt as to whether your claim is applicable for the scheme then seek advice from your trusted costs advisor.
What is the Precedent U?
The Precedent U (click here to download) (dubbed the Statement of Fixed Costs) is a new Excel document which will be for use in fixed costs disputes. As it is electronic it is self-calculating.
The document is compromised of three sections. These are titled Section A, B and C.
Section A sets out the case details to include details of which fixed costs regime the dispute relates. It has separate sections solicitor costs, disbursements and court fees.
Section B has columns for the amounts claimed with an explanation justifying/explaining why, the paying party's response and any counter-sums and a final column for the Court's decision.
Section C will be used only where claims are made for costs exceeding fixed recoverable costs (exceptional circumstances and/or vulnerability) pursuant to CPR r45.9 & 45.10. It will also be used where CPR 45.50(3) is engaged. This relates to non-PI claims on the Intermediate Track only. 45.50(3) states as follows:
"The costs to be awarded for stage S1 are subject to assessment up to a maximum of the figure shown for stage S1 in Table 14, except in a claim for personal injuries where the figure shown is fixed."
Additionally Section C will be used in claims where Unreasonable Behaviour applies pursuant to CPR 45.13. This can see an uplift or decrease of 50% of applicable fixed costs.
Where any of the following applies, a separate N260 (Statement of Costs) will be required:
- Costs are to be assessed as per CPR 45.50(3), this is Stage 1 costs for non-PI cases on the Intermediate Track which are to be assessed. Stage 1 costs for non-PI cases are capped rather than fixed.
- Costs exceeding Fixed Recoverable Costs are sought (exceptional circumstances).
- Costs exceeding FRC are sought on the grounds of vulnerability.
- Where Unreasonable Behaviour test is invoked.
Other points of note are the omission of reference to VAT in the document, it is not clear if the sums to be included in the same should be inclusive or exclusive of VAT. The calculation column may be used to set this out.
In addition, the document includes a Statement of Truth for the receiving party and requires the Paying Party's representative to sign their response.
What are the recoverable costs of a Fixed Costs Determination?
The recoverable costs of FCD will be set out in a new Table 17 under Practice Direction 45. The successful party in the process will be entitled to fixed recoverable costs of £500 plus VAT.
Should a party wish to appeal a paper decision then the recoverable costs of any oral hearing will also be fixed pursuant to Table 1 of Practice Direction 45. For a Fast Track claim on Complexity Bands 1 to 3 that cost would be £250 plus VAT whilst for a Fast Track Complexity Band 4 or Intermediate Track claim the oral hearing costs would be £333 plus VAT.
For any oral appeal, the party requesting the hearing must obtain a swing of 20%, else they will be liable for the costs of any oral hearing.
An additional court fee will be payable which appears to be the usual Part 23 application fee where proceedings have been issued. This is because the new CPR 45.64 states that:
"Where proceedings have been started, the application must be made in those proceedings under Part 23 as modified by this rule."
The general application fee is currently £303.
What about where proceedings are not issued? Then CPR 46.14 applies. This means costs-only proceedings must be brought. CPR 45.64(3) will provide that:
"Where proceedings have not been started, the application must be made by the commencement of costs only proceedings"
The current cost of commencing costs-only proceedings is £65.
It won't be lost that the difference in court fee between the two processes is sizeable. It's far cheaper to make the application by commencement of costs only proceedings, unless the court is expecting the application fee of £303 plus the costs-only proceedings fee of £65. It's not wholly clear though the new rules read as though as it would not require two court fees.
So recoverable time costs of £500 plus VAT plus either the application fee of £303 or the costs-only proceedings fee of £65 for non-issued cases.
How will the process work?
The process will be set out in revisions to Part 45 which will come into force on 1 October 2024. The key details for the updates to Part 45 are detailed below:
There will be a separate process for a summary determination of fixed costs where the order for costs is made at a hearing. This will see the court make the determination, in absence of agreement, at the hearing itself. This means advocates will need to be prepared for any costs arguments at any final hearing. Where the court can't make a summary determination at the conclusion of the hearing, the court is able to direct that the amount of fixed costs or disbursements be determined with or without a hearing and can give such directions as it sees a fit, an extremely wide discretion. The costs of the determination will be treated as if it were an interim application under CPR 45.8. This means costs of anywhere between £250 to £333 plus VAT for profit costs.
Where a claim settles without a hearing and the only issue is costs then Part 23 will now be modified by Part 45. The application must be started by commencement of costs only proceedings. The receiving party must provide evidence in support of the application. together with the new Precedent U. The Paying Party will have an opportunity to file any evidence within 21 days of service of the application where proceedings were previously issued or withing 21-days of filing the acknowledgement of service where proceedings were not previously issued.
The determination will be dealt with on paper and without a hearing, though the court can order an oral hearing if it feels it is need to fairly determine the issues. The costs for the procedure will be fixed as per the above at £500 plus VAT.
The Court will record its determination by annotating Precedent U. Any party can request an oral hearing within 21 days of the determination notice and if no oral hearing is requested the determination will be binding. Parties will be given at least 14 days' notice of any hearing. The kicker, however, is that any party who applies for an oral hearing must achieve an adjustment that is 20% within their favour or they will be responsible for adverse costs in accordance with CPR 45.8 (£250 to £333 plus VAT).
Under Part 46 new rules will be incorporated. Part 36 will not apply to any determination. This means that there will no longer be any opportunity to obtain Part 36 benefits in fixed costs disputes. A development that may well discourage parties from making offers in determination proceedings.
Should you have any queries arising from this article or upon costs generally then please do not hesitate to get in touch with our friendly team. You can also discuss details of our unlimited Fixed Costs retainer service. Please email FRC@carterburnett.co.uk for details or call 01482 534567 for an informal discussion.
Tagged as: fixed costs, Fixed Recoverable Costs
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